In response to a growing concern over improper Employee Retention Credit (ERC) claims, the IRS has reopened its Voluntary Disclosure Program (VDP), giving businesses a unique chance to correct these mistakes and avoid future penalties. This second round of the VDP runs until November 22, 2024 and offers significant relief to businesses that may have claimed ERCs in 2021 without fully meeting eligibility requirements.

What Does the VDP Offer?

The VDP allows businesses to repay only 85% of the credits they received, effectively offering a 15% discount to rectify errors. By participating, businesses can avoid potential audits, penalties, and interest—common consequences of erroneous claims. The program focuses exclusively on correcting 2021 claims, meaning any improper ERCs claimed for 2020 remain ineligible for this round of the VDP.

Additionally, businesses won’t be required to repay any interest that the IRS may have paid on their ERC refund claims.

Why the VDP Matters Now

The IRS has ramped up its scrutiny of ERC claims as it targets a surge of questionable submissions, many influenced by overly aggressive marketing tactics. As part of this intensified compliance effort, the IRS will mail up to 30,000 letters to businesses regarding potentially improper claims. If your business receives one of these letters, it’s essential to note that you may be ineligible to participate in the VDP for the quarter covered by the letter.

This proactive compliance step follows the IRS’s discovery of over $572 million in improper ERC claims for 2020, a number expected to rise given the larger credit amounts available in 2021.

How to Qualify for the VDP

To join the program, businesses must provide full transparency, including information on any advisors or tax preparers involved in the original ERC claim. For those unable to pay the required 85% upfront, the IRS offers alternative payment arrangements, though penalties and interest may apply.

Act Now to Avoid Future Problems

The reopening of the ERC Voluntary Disclosure Program presents a timely opportunity to set the record straight. Businesses should thoroughly review their 2021 ERC claims and consult a trusted tax professional to determine whether participation in the VDP is the best course of action.

Cash4Projects specializes in helping businesses find opportunities for financial relief through tax incentives like the ERC. If you’re unsure whether your business’s ERC claims are accurate or you’ve received one of the IRS letters, reach out to our team today. We’re here to help you navigate this complex landscape and ensure you’re protected from potential penalties.IRS Reopens Voluntary Disclosure Program to Address Erroneous Employee Retention Credit Claims

In response to a growing concern over improper Employee Retention Credit (ERC) claims, the IRS has reopened its Voluntary Disclosure Program (VDP), giving businesses a unique chance to correct these mistakes and avoid future penalties. This second round of the VDP runs until November 22, 2024 and offers significant relief to businesses that may have claimed ERCs in 2021 without fully meeting eligibility requirements.

What Does the VDP Offer?

The VDP allows businesses to repay only 85% of the credits they received, effectively offering a 15% discount to rectify errors. By participating, businesses can avoid potential audits, penalties, and interest—common consequences of erroneous claims. The program focuses exclusively on correcting 2021 claims, meaning any improper ERCs claimed for 2020 remain ineligible for this round of the VDP.

Additionally, businesses won’t be required to repay any interest that the IRS may have paid on their ERC refund claims.

Why the VDP Matters Now

The IRS has ramped up its scrutiny of ERC claims as it targets a surge of questionable submissions, many influenced by overly aggressive marketing tactics. As part of this intensified compliance effort, the IRS will mail up to 30,000 letters to businesses regarding potentially improper claims. If your business receives one of these letters, it’s essential to note that you may be ineligible to participate in the VDP for the quarter covered by the letter.

This proactive compliance step follows the IRS’s discovery of over $572 million in improper ERC claims for 2020, a number expected to rise given the larger credit amounts available in 2021.

How to Qualify for the VDP

To join the program, businesses must provide full transparency, including information on any advisors or tax preparers involved in the original ERC claim. For those unable to pay the required 85% upfront, the IRS offers alternative payment arrangements, though penalties and interest may apply.

Act Now to Avoid Future Problems

The reopening of the ERC Voluntary Disclosure Program presents a timely opportunity to set the record straight. Businesses should thoroughly review their 2021 ERC claims and consult a trusted tax professional to determine whether participation in the VDP is the best course of action.

Cash4Projects specializes in helping businesses find opportunities for financial relief through tax incentives like the ERC. If you’re unsure whether your business’s ERC claims are accurate or you’ve received one of the IRS letters, reach out to our team today. We’re here to help you navigate this complex landscape and ensure you’re protected from potential penalties.